Bear Case Scenario Bank of Nova Scotia $BNS, $CM, $TD, $RY, $BMO, $XLF, $C, $BAC, $JPM, $WFC,

Bank of Nova Scotia (NYSE:BNS) is about to release earnings. Ponder this Bear Case Scenario:

The high growth international banking market is earning smaller margins than the Canadian product lines. Additional growth is not financially wise.

Canadian Banking system has experienced a great run for the past ten years and BNS has participated. This will not continue and it will be harder to earn our daily bread.

In a low rate environment spreads are always under pressure. As rates increase the olde book stays firm and rigid as borrowers realize what they have and are loath to give it up.

George Gutowski writes from a caveat emptor perspective.

Bear Case Scenario Federal Home Loan Mortgage $FMCC, $MBI, $AMBAC, $SC, $XLF, $CIT, $NSM

Federal Home Mortgage Loan (OTC:FMCC) is about to release earnings. Ponder this Bear Case Scenario:

America is not out of the woods yet. Housing may have stabilized for now but until solid employment comes back Americans and the communities they live in are not financially strong. Real Estate is very localized. Close a factory or two and suddenly mortgage defaults soar.

Many mortgages are underwritten at historically low rates. Employment income is unstable. How many homeowners can survive a rate increase of three or four percent. Very few. Blood will flow down the streets as Americans hemorrhage in the bank account.

Why would you want to insure against this near certain adverse risk.

George Gutowski writes from a caveat emptor perspective. 

Bear Case Scenario MBIA $MBI, $FMCC, $AMBAC, $ALL, $TRV, $ACE, $CB, $TKOMY, $XLF

MBIA Inc. (NYSE:MBI) the olde Municipal Bond Insurance is about to release earnings. Ponder this Bear Case Scenario:

The trick to insurance is to charge enough premium and earn enough investment income to cover the inevitable losses on the policies you have written. Many American Cities are burdened with declining tax bases and huge retirement obligations. The arithmetic does not work. A few large cities have gone bankrupt such as Detroit just to prove that the underlying risks are probably under-priced which is the first fatal flaw of insurance.

Will investment income continue to create sufficient returns. Long bonds are suspect because of interest rate risk. Equities have been on quite a tear and cannot be expected to continue providing the same returns.

The business model is difficult to accept. This asset category historically has done very well. but eventually everything reverts to a mean. Risk has come home and wants to crawl into your warm bed.

George Gutowski writes from a caveat emptor perspective.

Little Grunt vs Big Noise Coming Rationalization in Social Media $STWIT, $TWTR, $FB, #SEO, $LNKD,

Social Media mania is at fever pitch. Everything is blue sky buy buy buy. Seen it before? Almost tedious isn’t it. Everyone is looking for eye balls, viewers, likes, clicks and such. Brand advertising vs Sell Through Pay Per Performance is the competitive stage. But there are no market or demographic differentiators.

Do you buy because you have children and have predictable needs? Do you buy because you love to travel? Do you buy because you are house proud and know how to improve real estate? Why do you buy.

Twitter (NYSE:TWTR) and Facebook (Nasdaq:FB) with billion dollar valuations essentially are one big messy pile of opportunities which have yet to resolve themselves. Twitter will eventually attract a certain type of mentality. Someone who likes it short and sweet.

Facebook will have a different follower who wants something more than 140 characters. As advertisers teach their social media networks they will find certain tactics work to sell a car and certain tactics work to sell hamburgers. Just like print works for certain offerings and television is better at others.

Twitter and Facebook are still relatively undifferentiated. They will default into certain genres because they are offering agnostic technology not because they are offering focused solutions. A radio station in New York city will have a different client list than a radio station in Tokyo. An internet radio station will need to develop a loyal demographic that will reward them economically either through subscriptions or advertising or both.

StockTwits (STWIT) is intriguing as it focuses solely on stock market investments. It operates in English which is the lingua franca of the business world. Twitter should buy them before a hungry rival decides a foothold in the investment information business is strategically important. So maybe it will be Bloomberg or Rupert Murdoch and Fox or Wall St Journal that buys them.

Amazon purchased Goodreads to control the reading community. Same logic to a certain extent.

You can speculate about StockTwits because it is focused. Twitter is hoping a broad-based tsunami carries them somewhere nice. It might work but the Beta on that business model is much higher.

George Gutowski writes from a caveat emptor perspective.

Bear Case Scenario $TD, $CM, $BNS, $RY, $BMO, $XLF, $C, $BAC, $WFC, $JPM

Toronto-Dominion Bank (NYSE:TD) is about to release earnings. Ponder this Bear Case Scenario:

American analysts are fixated on a Canadian Housing Bubble. This is discouraging many American investors from accumulating more shares at the present. Many mortgages have been underwritten with very low-interest rates. As rates increase and revert to the mean some chickens will come home to roost.

As the TD continues to expand outside of the Canadian Market there are risks of expertise and understanding of local conditions. Banking is like Politics. It’s all so very local.

Low net interest rate margins will be a negative factor as Canadian Banks increase competition for quality business.

George Gutowski writes from a caveat emptor perspective

Bear Case Scenario CIBC $CM,$TD, $RY, $BMO, $BNS, $XLF, $C, $BAC, $WFC, $JPM

Canadian Imperial Bank of Commerce (NYSE:CIBC) is about to release earnings. Ponder this Bear Case Scenario:

CIBC suffered a strategic defeat when it lost the Aeroplan loyalty program. Many of those receivables will now be carried by competing banks. They will also move quickly to exploit the inroad and increase relationships and draw more business away from CIBC. CIBC is launching a competing offering. however they are behind and have to spend serious capital just to catch up. Bad news to follow.

American analysts continue to be fixated about the Canadian Housing bubble. This drives away American investors who may wish to increase their exposure. As interest rates rise many mortgages underwritten at historically low rates will be under water.

In general low-interest rates mean small margins and increased competition for quality business. CIBC needs to fight off the competition and attract new business. It does not have a demonstrable model to do that.

George Gutowski writes from a caveat emptor perspective.

Bear Case Scenario Best Buy $BBY, $AMZN, $EBAY, $AZO, $HUWHY

Best Buy (NYSE:BBY) is about to release earnings. Ponder this Bear Case Scenario:

Entertainment software category is shrinking. Replacement products have smaller margins and so it gets harder to make a buck.

Competing channels abound. Everyone is after the same consumer who will only buy once not weekly like groceries. What is the difference? Price competition is prevalent and difficult.

Warranty sales historically have been huge and ultra-profitable. Warranty sales come with big-ticket purchases such as appliances. As these sales drift away the profitable cash generating warranty will diminish.

George Gutowski writes from a caveat emptor perspective.